Social Security Update

Seems like I have to do this yearly. You'd think that it would get more press coverage, but somehow it doesn't. I'm referring to the annual report from the Social Security trustees.

Let's start with some quotes from the report: "After 2021, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security's annual deficits until 2034, when the OASDI reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2091."

Let me try to put that into English. It says that the Social Security trust fund will run out of money in 2034. At that time only incoming taxes will be available to pay for benefits. And the incoming taxes will only cover about 75% of the promised benefits.

"Under current projections, the annual cost of Social Security benefits expressed as a share of workers' taxable earnings will grow from 13.7 percent in 2016 to roughly 17.0 percent in 2038...Program costs equaled 5.0 percent of GDP in 2016, and the Trustees project these costs will increase to 6.1 percent of GDP by 2037..." source: Status of the Social Security and Medicare Programs

In other words, in order to fully fund the program SS payroll taxes on those working would need to increase to 17% in 2034 from it's current 12.4%.

For the sake of time, let's skip all the political arguments about SS. We won't solve those problems here. But we can take some steps to prepare ourselves for the various possible outcomes.

For most of us nearing or in retirement we look at SS and any pensions we have as a baseline income. Then we figure what we'd like to have above that from earnings or retirement savings.

It makes a difference on how soon you want to begin collecting Social Security. You can use this tool to find out what could work best for you.

It also means that we need to be more aware of how much the investments in our retirement plans are earning. You'll want to do things like maximizing your 401k plan and make sure your other investments and savings accountsare growing at an acceptable rate.

The bottom line? You can't just assume that you'll retire and live on Social Security. For most of us it simply won't provide all of the income we'll need even if there are no benefit cuts. In 2016 the average Social Security benefit was $1400 per month or $16,800 yearly. That's not a lot of money. You'll need to prepare for retirement carefully if you want to enjoy the time years of work has earned you.

Keep on Stretching those Dollars! Gary

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